Article I of the U.S. Constitution grants Congress the power to appropriate funds from the Treasury, pay the
obligations of and raise revenue for the federal government, and publish statements and accounts of all financial

By law, Congress is also obligated to write a budget representing its plan to carry out these transactions in the
forthcoming fiscal years. While the President is required to propose his administration’s budget requests for
Congress’s consideration, Congress alone is responsible for writing the laws that raise revenues, appropriate
funds, and prioritize taxpayer dollars within an overall federal budget.

The budget resolution is the only legislative vehicle that views government comprehensively. It provides the
framework for the consideration of other legislation. Ultimately, a budget is much more than a series of
numbers. It also serves as an expression of Congress’s principles, vision and philosophy of governing.

This Budget Resolution for Fiscal Year 2012 intends to recommit the nation fully to the timeless principles of
American government enshrined in the U.S. Constitution – liberty, limited government, and equality under the
rule of law. It seeks to guide policies by those principles, freeing the nation from the crushing burden of debt that
is now threatening its future.

This budget is submitted, as prescribed by law, to apply these principles, reflect this vision, and provide a
framework for the orderly execution of Congress’s constitutional duties for Fiscal Year 2012 and beyond.

House Budget Committee | April 5, 2011


1 trillion in higher wages and an average $1. SUMMARY OF THE FISCAL YEAR 2012 BUDGET RESOLUTION Where the President has failed. Ensures that the next generation inherits a stronger. and $5. advancing instead common-sense solutions focused on lowering costs. Unleashes prosperity and economic security. SPENDING CUTS AND CONTROLS: Stops Washington from spending money it does not have on government programs that do not work. stops spending money the government doesn’t have. Locks in spending cuts with spending controls. and lifts the crushing burden of debt. Brings government spending to below 20 percent of the economy. Improves incentives for growth.5 trillion over the decade. increasing real GDP by $1.8 trillion relative to the current-policy baseline. reflects the ban on earmarks.5 million additional private-sector jobs in the last year of the decade. TAXES Keeps taxes low so the economy can grow. 2011 4 . PATIENT-CENTERED HEALTH CARE: Repeals and defunds the President’s health care law. expanding access and protecting the doctor-patient relationship.2 trillion in government spending over the next decade compared to the President’s budget. in which spending never falls below 23 percent of GDP over the next decade. RESTORING AMERICA’S EXCEPTIONAL PROMISE: Tackles the existential threat posed by rapidly growing government and debt. Sets top rates for individuals and businesses at 25 percent. and curbs corporate welfare bringing non-security discretionary spending to below 2008 levels. Spurs economic growth. DEBT AND DEFICITS Reduces deficits by $4. Prevents the $1. Calls for a simpler. brings the unemployment rate down to 4 percent by 2015.000 per year in higher income for each family. and results in 2. Lowers tax rates for individuals. Surpasses the President’s low benchmark of sustainability – which his own budget fails to meet – by reaching primary balance in 2015. Puts the budget on the path to balance and pays off the debt. House Republicans will lead.4 trillion compared to the President’s budget over the next decade. savings.This plan puts the budget on the path to balance and the economy on the path to prosperity. Eliminates hundreds of duplicative programs. KEY OBJECTIVES ECONOMIC GROWTH AND JOB CREATION: Fosters a better environment for private-sector job creation by lifting debt-fueled uncertainty and advancing pro-growth tax reforms. applying the nation’s timeless principles to this generation’s greatest challenge. businesses and families. yielding $1. and investment. House Budget Committee | April 5.This budget helps spur job creation today. KEY FACTS SPENDING Cuts $6. less burdensome tax code for households and small businesses. GROWTH AND JOBS Creates nearly 1 million new private-sector jobs next year. more prosperous America.5 trillion tax increase called for in the President’s budget. a sharp contrast to the President’s budget. REAL SECURITY: Fulfills the mission of health and retirement security for all Americans by making the tough decisions necessary to save critical health and retirement programs. Eliminates roughly $800 billion in tax increases imposed by the President’s health care law.

Promoting Economic Growth and Job Creation Individual Tax Reform: Simplifies the broken tax code. unlocks American energy production to help lower costs. brings the top rate from 35 to 25 percent to promote growth and job creation. 2011 5 . to a more competitive 25 percent. KEY COMPONENTS Efficient. Reduces the bureaucracy’s reach by applying private-sector realities to the federal government’s civilian workforce. Effective and Responsible Government Prioritizing National Security: Reflects $178 billion in savings identified by Defense Secretary Robert Gates. and stops Washington from picking the winners and losers across sectors of the economy. reforms Fannie Mae and Freddie Mac. reinvesting $100 billion in higher military priorities and dedicating the rest to deficit reduction. and reduce dependence on foreign fossil fuels. Preparing the Workforce for a 21st Century Economy: Consolidates the complex maze of dozens of overlapping job-training programs into more accessible. responsible energy exploration in the United States. Fulfilling the Mission of Health and Retirement Security Saving Medicare: Protects those in and near retirement from any disruptions and offers future beneficiaries the same kind of health-care options now enjoyed by members of Congress. Streamlining Other Government Agencies: Returns non-security discretionary spending to below 2008 levels. addressing not only what Washington spends. Repeals the new health care law and moves toward patient-centered reform. but also how tax dollars are spent. which is the highest in the industrialized world. House Budget Committee | April 5. Targets hundreds of government programs that have outlived their usefulness. one-size-fits-all approach by converting the federal share of Medicaid spending into a block grant that gives states the flexibility to tailor their Medicaid programs to the specific needs of their residents. and innovate in the United States by lowering the corporate tax rate from 35 percent. Strengthening the Social Safety Net Repairing a Broken Medicaid System: Ends an onerous. Ending Corporate Welfare: Ends the taxpayer bailouts of failed financial institutions. Changing Washington’s Culture of Spending: Locks in savings with enforceable spending caps and budget- process reforms. accountable career scholarships aimed at empowering American workers to compete in the global economy. Corporate Tax Reform: Improves incentives for job creators to work. lowering rates and clearing out the burdensome tangle of loopholes that distort economic activity. Boosting American Energy Resources: Removes barriers to safe. invest. create jobs. Advancing Social Security Solutions: Forces action by the President and both chambers of Congress to ensure the solvency of this critical program.

A CONTRAST IN BUDGETS The Path to Prosperity President’s FY2012 Budget Spending Cuts $6.5 trillion tax the broken tax code increase Corporate Tax Lowers the corporate tax rate to 25 Leaves in place the highest corporate percent to promote job creation and tax rate in the developed world.7 trillion relative Adds $9. creates nearly 1 million new debt and government spending – private-sector jobs next year. Pays off the debt next decade. health care law. Reduces deficits $4.2 trillion deficit in FY2012 marks FY2012. Commits to 15 percent of GDP in 2050 the explosive growth of government Deficit Brings deficits under $1 trillion in $1.2 trillion in spending cuts relative $400 billion in new spending to President’s budget.1 trillion to the debt over the to the President’s budget.4 trillion the fourth straight deficit exceeding relative to President’s budget. Accelerates a debt-fueled over time economic crisis Health Care Repeals the job-destroying health care law Accelerates the job-destroying health care law Jobs According to the Heritage Center for Accelerates tax hikes. drops below 23 percent. 2011 6 . Puts the the $1 trillion mark budget on a path to balance Primary Balance Primary balance (spending – interest Never reaches primary balance – payments = revenue) is reached in 2015 failing to clear even the low bar the administration set for itself Debt Held by Public Reduces the debt by $4. pre- bailout levels Taxes Stops all of President’s taxes.8 trillion in above CBO’s current-policy spending cuts relative to CBO’s baseline current-policy baseline Spending Levels Brings non-security discretionary Locks in reckless spending spree spending to below pre-stimulus. $5. global competitiveness driving jobs overseas Size of Government Brings government down to below 20 Spending as a percent of GDP never percent of GDP by 2015. Data Analysis. Brings policies that result in slower unemployment rate down to 4 percent in economic growth and fewer American 2015 jobs House Budget Committee | April 5. Reforms Imposes a $1.

2011 7 .House Budget Committee | April 5.

CHOICE OF TWO FUTURES House Budget Committee | April 5. 2011 8 .

INTRODUCTION Americans face a monumental choice about the future of their country. This budget. But a government that loses its sovereignty to its bondholders cannot long guarantee its people’s prosperity – or secure their freedom. yet failed to deliver on its promises to create jobs. just as they ended a unified Democratic majority last fall. and moral imperatives by confronting the nation’s most urgent fiscal challenges. the last Congress took actions that further undermined them. A government that buries the next generation under an avalanche of debt cannot claim the moral high ground in the world. and hard-working citizens. This Path to Prosperity draws upon solutions from across the political spectrum and builds upon the important work of the President’s bipartisan Commission on Fiscal Responsibility and Reform. It chooses instead a path to prosperity – by limiting government to its core constitutional roles. Mismanagement and overspending have left the nation on the brink of bankruptcy. keeping America’s promises to seniors. Political parties lose elections. limited government. The Path to Prosperity. In recent years. They reject empty promises from a government that cannot live within its means. They deserve – and demand – honest leaders willing to stand for solutions. For too long. It disavows the relentless government spending. and equality under the rule of law. and life in the republic goes on. The American people ended a unified Republican majority in 2006. and unleashing the genius of America’s workers. led the nation downhill. The empty promises made by Washington over the years have resulted in economic hardships today and increasing pessimism about tomorrow. investors. Congress can no longer afford to ignore these demands. toward a debt-fueled economic crisis and the demise of America’s exceptional promise. Only recently. heeds America’s political. perverse incentives. self-reliant. and entrepreneurs. This did not sit well with the American people. and borrowing that are leading America. At a time when the free-market foundations of the American economy were in desperate need of restoration and repair. Citizens stood up and demanded that their leaders reacquaint themselves with America’s founding ideals of liberty. They deserve the truth about the nation’s fiscal and economic challenges. Government at all levels is mired in debt. 2011 9 . House Budget Committee | April 5. Acute economic hardship was exploited to enact unprecedented expansions of government power. unsurprisingly. A government that allows economic destinies to be determined by political considerations rather than merit cannot lead the world in productivity and growth. millions of American families saw their dreams destroyed in a financial disaster caused by misguided policies. Americans reject leaders who focus on the pursuit of power at the expense of principle. This crisis squandered the nation’s savings and crippled its economy. And a government that promotes dependency and undermines the institutions of faith and family will inevitably weaken the nation’s greatest strength: the exceptional character of its entrepreneurial. and irresponsible leadership. This budget resolution reflects that choice. both political parties have squandered the public’s trust. right at this moment. policymakers in Washington have traveled the path of least resistance – a path that has. taxing. economic. The President and his party’s leaders embarked on a stimulus spending spree that added hundreds of billions of dollars to the debt.

fulfilling the mission of health and retirement security for all Americans. offers reforms that promote initiative by rewarding effort. and to preserve its promise for the next generation. In all the chapters of human history. This budget rejects a culture of complacency. “We cannot escape history. This budget’s goal is to keep it exceptional. there has never been anything quite like America.This Path to Prosperity reflects input from leaders at the state and local level. and aims to restore the dynamism that has defined America over the generations.” Will this be remembered as the Congress that did nothing as the nation slouched toward a preventable debt crisis and irreversible decline? Or will it instead be remembered as the Congress that did the hard work of preventing that crisis – the one that chose the path to prosperity? Decline is antithetical to the American Idea. America is a nation conceived in liberty. 2011 10 . We of this Congress and this Administration will be remembered in spite of ourselves. House Budget Committee | April 5. dedicated to equality. economists and experts who have testified before the House Budget Committee. Above all. this Path to Prosperity calls for a government faithful to its limited but noble mission: securing every American’s right to pursue a destiny of his or her choosing. In the words of Abraham Lincoln. This Path to Prosperity applies America’s timeless principles to today’s greatest challenges by committing to three key goals: lifting the crushing burden of debt. and strengthening the foundations of economic growth and job creation. and defined by limitless opportunity. and American citizens calling for honest leadership and real solutions.

with considerable focus on the billions of dollars it wasted on dubious government projects as well as the many promises it broke with respect to job creation and economic growth. defense spending should be executed with greater efficiency and accountability. the 2009 stimulus law has gotten the most attention. Since January of 2009. foreign aid. 2011 11 . received a 36 percent budget increase in just two short years. these agencies have been the beneficiaries of a major spending spree over the last two years. and funding for most government agencies. That understanding begins with the elements of the federal budget: Annually Approved Spending Discretionary spending – FIGURE 1 funding debated and approved annually by Congress and the President – accounted for slightly less than 40 percent of all federal spending in 2010. Over half of this category goes toward national defense. An inevitable consequence of the last Congress’s decision to ramp up spending so quickly was that billions of Americans’ hard-earned tax dollars were squandered. The Government Accountability Office (GAO) – the non- House Budget Committee | April 5. This category includes transportation. but it is important to put that number into perspective. COMPONENTS OF THE FEDERAL BUDGET Before laying out a vision for the future of the country – for that is what a federal budget is – it is first necessary to provide an honest assessment of the facts. But domestic government agencies also received large increases in their base budgets – the Environmental Protection Agency (EPA). The category in Figure 1 labeled “non-defense discretionary spending” is primarily devoted to funding other government agencies. education. Understanding how the government spends the money it takes in by taxing and borrowing is the first step toward the goal of reversing the tide of red ink and getting the economy growing again. there has been a 24 percent increase in this slice of the pie – a number that jumps to 84 percent when stimulus funds are included. But responsible budgeting must never lose sight of the fact that the first responsibility of the federal government is to provide for the defense of the nation. Defense spending as a share of the budget has fallen from around 25 percent thirty years ago to around 20 percent today. Of the many new laws that made up the recent spending spree. While American families have been tightening their belts. energy. for example. Like all categories of government spending.

unemployment benefits. these major entitlements consumed about 30 percent of the budget – a number that has grown to over 40 percent today (see Figure 1). he or she automatically receives – or “is legally entitled” – to the benefit. If an individual meets legal eligibility requirements for these government programs. March 2011. The real drivers of the nation’s debt lie elsewhere. these programs were created with a 20th-century economy in mind. Social Security. They were not designed for the new demographic and economic challenges of the 21st century. This category includes food stamps. it is usually referred to as “mandatory spending. As illustrated in Figure 1. and Enhance Revenue.partisan agency that audits the government’s books – recently found between $100 billion to $200 billion in duplication. Unless action is taken to reform these programs. and the House continues to push the Senate and the President to bring spending under control for the remainder of the current fiscal year. 2011 12 . while providing a safety net for those citizens who meet with misfortune along the way? For decades. Medicare. Social Security is financed through a pay-as-you-go system. they will continue to crowd out all other national priorities until they break the federal budget. In 1970. But getting discretionary spending under control is only a first step toward fiscal sustainability.” The three largest entitlement programs are Social Security. Medicare and Medicaid into bankruptcy.1 Clearly. the share of the budget that goes to these entitlement programs is growing rapidly. and waste in federal spending. in pursuit of dreams large and small. Unlike defense. Congress must restore discipline to this category. the House of Representatives voted to return spending on domestic government agencies to their pre-stimulus levels. there were about 42 working-age Americans for each retiree. ensuring government can efficiently and effectively meet its proper responsibilities.” even though Congress can change the law at any time. seniors have been able to rely on Social Security and Medicare for their basic retirement needs. for 1Government Accountability Office. which means that current workers’ Social Security taxes are used to pay benefits for current retirees. Simply put. annually appropriate or properly scrutinize this category of spending. But Americans will not be able to rely on these programs for much longer unless Congress repairs and reforms them. overlap. and farm subsidies – programs that are frequently referred to as “entitlement programs. Demographics The first is demographic. Opportunities to Reduce Potential Duplication in Government Programs.gao. Congress created these programs in the middle decades of the last century in response to a problem that has preoccupied American lawmakers for over a century: How can government best preserve the freedom to risk and to dare. The average life expectancy for men in America was 60 years. while Medicaid has sought to ensure that low-income Americans would not go without essential health care. In 1935 when Social Security was enacted. Already this year. Medicare and Medicaid all face structural problems that are driving them – and the country – into bankruptcy.items/d11318sp. The Path to Prosperity builds on these efforts to cut spending. Save Tax Dollars. Autopilot Spending Programs that have “autopilot” spending authority under existing law make up the rest of the budget. even though some of them affect one program more than the others. autopilot spending accounted for around 60 percent of all federal spending in 2010. Congress does not regularly debate. There are three key forces driving Social Security. Because permanent law governs the funding levels of programs in this category.pdf House Budget Committee | April 5. http://www. and Medicaid. All three are This problem is most clearly seen in the financing for Social Security.

redundant treatments. Real reform – especially with respect to Social Security – must reflect demographic reality. Nearly 50 cents of every dollar spent on health care in this country is spent by federal. This represents a massive shift of earnings away from younger families trying to build their futures. since the creation of the program. there were 3. health-care costs rose by over 7 percent.women it was 64. For much of the last two years. toward Social Security recipients. In 2010. The explosion of payments in the 75 years since the Social Security system was enacted will be dwarfed by the demographic demands about to come. thanks to innovations in medical technology and health care.5 percent of one retiree’s benefits. But these programs aren’t just affected by rapidly rising health-care costs – they are actually a key driver of inflation in the health-care sector.6 years. At the same time. when Social Security was first enacted in 1935. Not only is our nation aging. By 2030. Economics The second force is economic. The first members of the baby-boom generation – those born between 1946 and 1964 – are already eligible for early retirement.Yet rapidly rising health-care costs remain as big a problem as ever. compared to around 1 percent for all other goods and services.5 million beneficiaries. there are over 50 million beneficiaries – an over fourteen-fold increase. each worker. it was easy for the program to generate sufficient revenue to meet its promises to those over 65. and the cost in both time and money of mistaken billings and misplaced House Budget Committee | April 5. state or local government. In 1950. Currently. the average age of retirement was 69. and are expected to grow further. Washington has been embroiled in a bruising debate over a law that was supposed to provide a “comprehensive” solution to the nation’s health-care problems by putting even more of the health sector under government control. much of the government’s money gets wasted – and shows up as inflation in the cost of care. Everyone who is on Medicare or knows someone on Medicare has stories about waste in the system – unnecessary tests. was contributing less than 2.8 years. To put this in perspective. No economy can grow and thrive under that heavy a tax burden. 2011 13 . Because of the design and structure of these programs. In 2009. it was 63. This is putting enormous pressure on Medicare and Medicaid. With these FIGURE 2 demographics. In 1945. on average. each wage earner will be paying for nearly half of each retired person’s full benefits. however. The demographic situation has changed dramatically. there has also been a demographic shift to a lower retirement age. life expectancies have lengthened to an average of 75 years for men and 80 years for women.

it is often the case that their only option is to impose across-the-board reductions in reimbursements to doctors. And it will dramatically expand a Medicaid program that is already breaking state budgets and adding to a growing flood of red ink at the federal level. particularly with regard to Medicaid. these patients are left with fewer options and lower- quality care. dictates. This kind of waste is inevitable in a top-down. and it pushes quality health care out of reach for those who are not eligible for federal programs. policymakers would be left with no good options. Making do without any federal government departments. will funnel more people into a broken system. including the military.records. Medicare and Medicaid will soon grow to consume every dollar of revenue that the government raises in taxes. These incentives encourage states to expand the program beyond those who are truly in need. Skewed political incentives The third force. Real reform – especially with respect to Medicare – must eliminate this unsustainable waste and reduce inefficiencies and costs by giving beneficiaries themselves more control over their own health-care benefits and decisions. boils down to a question of control. it saps the system of innovation and efficiency. Blank- check commitments create perverse incentives for everyone in the health-care system to maximize his or her share of this apparently limitless government subsidy. with most of the power concentrated at the federal level. Skewed political incentives have proved especially damaging in the Medicaid program. and it’s a big reason that costs have spiraled out of control. When even their smaller share of the tab becomes unaffordable. Already. Any effort to propose significant reforms to these programs triggers a barrage of demagoguery and entrenched resistance. Social Security. In this country. Because the federal government matches every state dollar spent on the program. (Providers predictably increase the number of services provided for each condition as the government lowers fees). At the same time. As a result. Worse. Last year’s health-care law – with its maze of mandates. states do not pay the full cost of expanding the program. which leave many doctors unwilling to see Medicaid patients. where should power reside? Should it be centralized in the hands of federal bureaucrats. This results in more demands to increase federal subsidies and control. health insurance companies have announced big premium hikes related to the law’s new mandates. Moreover. but few have been willing to propose real solutions. Empty promises Policymakers have known about these problems for decades. absent action. is not really House Budget Committee | April 5. Figure 3 makes it very clear that. controls. tax hikes and subsidies – exacerbates this flawed model and will push costs further in the wrong direction. Real reform – especially with respect to Medicaid – must give states the flexibility they need to better assist their most vulnerable populations. Its so-called cost controls amount to the same kind of fee-for-service reductions that have failed to control costs in Medicare for decades. local and individual level? The current incentive structure. government-run system. As government increases subsidies and control over the price and delivery of health care. The new health care law. every dollar in Medicaid expenditures cut from state budgets triggers more than a dollar worth of cuts in federal funding. At that point. 2011 14 . or decentralized across the country at the state. states are not given the flexibility to design their Medicaid programs in smart or efficient ways. blank-check commitments to reimburse health-care providers for services – and this very structure raises costs and reduces efficiency. with its large expansions of Medicaid. as has happened in many states. This leads to waste and fraud on a massive scale. drives the heedless expansion of these programs and therefore the growth of health-care costs for all Americans. America’s health-care entitlements are currently set up as open-ended.

Social Security benefits are scheduled to be cut by 22 percent in 2037. In industries such as steel. Americans can expect the same thing to happen to Social Security and Medicare. government gets closer to breaking promises to current retirees while adding to a growing pile of empty promises made to future generations. responsible steps to update their unworkable. 20th-century benefit structures. Many retirees lost the critical health and retirement benefits that they were counting on. and neither is raising taxes to a level that no free and prospering economy could sustain.FIGURE 3 option at all. workers lost promised benefits when their employers failed to take timely. The foreign governments and institutional lenders that finance America’s debt would cut up the nation’s credit cards before things got that far. it will lose even the ability to make such choices on its own terms. FIGURE 4 Unless Congress acts. and a crushing tax burden on young families. aviation and autos. Of course.S. if Congress continues to delay. Under current law. America has seen unfunded obligations much. when the Social Security trust fund runs out of assets and payroll taxes are not sufficient to cover benefits owed. the U. Medicare is on a similarly unsustainable path – the Medicare trend line illustrated in Figure 3 is a mathematical impossibility. 2011 15 . steep cuts in entitlement benefits to current seniors. Future benefit cuts – against a backdrop of skyrocketing House Budget Committee | April 5. less help for the poor. Each year that Congress fails to act. much less severe than these take down some of its proudest companies. That would mean sudden. The government’s unfunded liabilities – promises the government makes to current workers about their health and retirement security for which it has no means to pay – are growing by trillions of dollars a year.

strengthens its health and retirement safety net. 2011 16 . Nor can the government solve this problem just by raising the top individual tax rates: Even if it were wise to raise taxes on the most successful small businesses in America – most of which are owned by individuals and file at individual rates – the government cannot even come close to closing the fiscal gap that way. government revenue has averaged between 18 percent and 19 percent of GDP. Figure 5 shows that Washington has a spending problem. Americans have had enough instability in their lives. and they deserve a federal health and retirement safety net that they can count on. If Congress wants to avoid defaulting on federal health and retirement programs. and supports robust economic growth and job creation.S. http:// www. as part of an overall effort to fix the nation’s unsustainable deficits.S. The non-partisan Congressional Budget Office has concluded that the tax rates needed to sustain the nation’s current fiscal trajectory into the future would end up sinking the economy. Over the past 40 years. the government would have to collect an additional $ each year on average from every taxpayer in the top two brackets. 3 The National Commission on Fiscal Responsibility and Reform. government is not running sustained deficits because Americans are taxed too little. This level has generally been compatible with prosperity. protects those in or near retirement from any disruptions in their benefits. Taxes The U.3 2 Congressional Budget Office. economy.2 That is one reason that the Commission on Fiscal Responsibility and Reform proposed. The trend is clear: Chasing ever-higher spending with ever-higher tax rates would leave the U. December 2010. a fundamental tax reform plan that actually lowered income tax rates to promote growth. not a revenue problem. May 2008. to say nothing of the pain felt by FIGURE 5 American families deprived of the chance to save for a better future. The government is running deficits because it spends too much. high wages and entrepreneurship. on top of what these taxpayers already pay. To close the fiscal gap by raising the top rates.fiscalcommission. The Moment of Truth.costs – are a certainty if the program goes unreformed. Ryan. it must adopt a program of gradual adjustment – one that frees the nation from the shadow of debt.S. Letter to Congressman Paul D. economy at a severe disadvantage compared to the rest of the world. The President’s budget would drive both spending and revenues to historic highs as a share of the total U. while eliminating tax loopholes to broaden the tax base. even though there is broad agreement that the structure of the tax code should be simplified and made more conducive to economic growth.pdf House Budget Committee | April 5.

House Budget Committee | April 5. it has to borrow money to cover the shortfall. economy. Clearly. 2011 17 .S.A broader base with lower rates is central to a fair. Congress must address this crisis now – before it is too late. This year is projected to mark the third straight year in which the nation borrows over $1 trillion. The deficit is how much the nation has to borrow to fund the gap between spending and revenue in a given year. efficient and sustainable tax code. which is nearly the size of the entire U. The President’s budget would nearly double this debt over the next ten years. and the economic growth spurred by such a reform is a precondition to fixing the nation’s fiscal mess. The debt is the total amount outstanding that the government owes – it represents the accumulation of deficits over time. The gross debt is scheduled to hit $14 trillion. Deficits and Debt When the government spends more than it takes in through taxes. bringing it to $26 trillion.

2011 18 .” Reuters with CNBC. and these purchases have helped keep interest rates low. The government’s failure to prevent this completely preventable crisis would rank among history’s most infamous episodes of political malpractice. March 9. Congress must show the market that it has a credible plan for getting the national debt under control. But it must find the will to 41990901/ (accessed March 31. House Budget Committee | April 5. in order to avoid this fate.S. It is the future of a nation in decline – its best days come and gone. and others are advising their clients to do the same. the Federal Reserve has recently become the largest buyer of government debt in the country. and find it quickly. By contrast. debt.4 Through its interventions into the economy. America’s unsustainable budget path is no longer a problem that is far off in the future. government remains on its current unsustainable path. severe economic turmoil ensues. The lenders who buy much of the federal government’s debt have noticed the disconnect between the government’s perilous fiscal situation and the low rates of interest it is paying on the bonds that constitute the government’s 2011 http://www. economy and ultimately capsize it if left on its present course. Over the past few years. in order to ease concerns over the government’s credit- worthiness and stave off an interest-rate spike. An Unsustainable Path The recent sovereign debt crises in Greece and other highly-indebted European countries provide a cautionary tale of the rough justice of the marketplace – lenders cannot and will not finance unsustainable deficits forever. 2011). Some have even decided to purge their portfolios of U. This budget is offered in the hope that it might demonstrate the new House majority’s determination to face the government’s most difficult fiscal challenges. 4 “Pimco’s Biggest Fund Dumps Treasury Bond Holdings.S. This is not the future of a proud and prosperous nation.Yet decline is not inevitable. But the Fed is scheduled to stop making these purchases this summer. nearly every fiscal expert and advisor in Washington has warned that a major debt crisis is inevitable if the U. and when they cut up the credit cards of profligate countries. BURDEN OF DEBT The United States is facing a FIGURE 6 crushing burden of debt – a debt that will soon surpass the size of the entire U. Congress has all the fiscal powers necessary to command a change of course. But the last crisis was foreseen only by a small number of perceptive individuals who recognized the implications of unwise decisions being made in Washington and on Wall Street.S.cnbc. Americans have seen just how quickly a severe financial crisis can create widespread pain and chaos.

Debt in excess of 60 percent of the economy is not sustainable for an extended period of time. That is bad news for the United States. but also because the bonds of most foreign countries are looking even riskier. economy by 2021. 6Reinhart. the spending spree of the last two years. House. 2011). 5 Wolf. Interest rates – and the burden of paying interest on the debt – have nowhere to go but up. Neither of these conditions is going to printedition/news/20101129/1adeficit29_cv.S. a sharp increase from a generation ago when foreigners owned just 5 percent of U. from nearly 70 percent this year to over 87 percent of the U.S. it would not be so alarming. economy this year. “Are We Ready to Cut the U. Foreign flight It would be one thing if the U. House Budget Committee | April 5. the President’s budget would keep the debt climbing as a share of the economy in the decade ahead.” 5 Nearing a Debt Crisis Like a household or business.6 How a Debt Crisis Would Unfold Spiraling interest rates The first sign that a debt crisis has arrived is that bond investors lose confidence in a government’s ability to pay its debts – and by that point. However.usatoday. combined with the coming retirement of nearly 80 million baby boomers. debt. Committee on the Budget. Interest payments are already consuming around 10 cents of every tax dollar. government owed most of this money to domestic lenders. particularly during a time of crisis.S. That means that one in five tax dollars will be dedicated to making interest payments by the end of the decade – and that’s according to optimistic projections about interest rates. a nation’s indebtedness is best understood in terms of how much it owes relative to how much it makes.S.S. November 29. But the nation’s reliance on foreign creditors has increased dramatically over the past few decades. begin to lose confidence in the U. especially foreign governments such as China. If interest rates increase by a higher-than- expected amount in future – which appears to be more likely – then the nation’s interest payments could cost trillions of dollars more. they will demand higher compensation to offset the perceived risk of holding U. Hearing. March 10.S. Deficit?” USA TODAY. Carmen M. debt. 2010 http://www. If this were merely a temporary rise in the debt. government’s ability to solve its most difficult fiscal challenges. debt – meaning sharply higher interest rates. Lifting the Crushing Burden of Debt. it is usually too late to avoid severe disruption and economic pain.S. the U.S. said it best: “The era of deficit denial is over. If foreign investors. 2011. government owes to others – will reach nearly 70 percent of the entire U.Erskine Bowles. Testimony before the U. By that measure. Richard. But as interest rates rise from their current historically low levels and debt continues to interest payments are projected to consume over 20 percent of all tax revenue by 2020. This makes the nation vulnerable to a sudden shift in foreign investor sentiment. University of Maryland economist Carmen Reinhart testified before the Budget Committee that 90 percent is often a trigger point for economic decline. partly because of the Fed’s interventions in the market.S. Right now. debt held by the public – money that the U. government is able to borrow at historically low rates. threaten to turn these recent deficit spikes into a permanent plunge into debt. According to the non-partisan CBO. the Democratic co-chairman of the Commission on Fiscal Responsibility and Reform. Foreigners now own roughly half of all publicly held U.S.S.htm (accessed March 31. 2011 19 .

runaway inflation. “Growth in a Time of Debt. government. But these investment flows work both ways. the study confirmed that massive debts of the kind the nation is on track to accumulate are associated with “stagflation” – a toxic mix of economic stagnation and rising inflation. If the Congress continues to put off difficult choices regarding the nation’s long-term problems. but inflation also becomes a problem.” January 2010.7 The study looked specifically at the United States.FIGURE 7 During the financial crisis. no entity on the planet is large enough to bail out the U. and this helped keep interest rates low.pdf House Budget Committee | April 5. or all three. foreign investors will re-evaluate the creditworthiness of the United States and demand higher interest rates. the nation would still be in for a long and grinding period of economic decline if it stays on its current path. 7 Reinhart. Rogoff. The study found that not only is average economic growth dramatically lower when gross U. 2011 20 . as the heavily indebted nations of Europe have recently learned. http://www.harvard. focusing on growth and inflation relative to past periods when this nation has experienced high debt levels. This would create a huge hole in the economy that would be exacerbated by panic. These higher rates would most likely come as a shock to most Americans. Even if high debt did not cause a crisis. Much higher interest rates on government debt would translate into much higher interest rates on mortgages. debt exceeds 90 percent of the economy. who have grown accustomed to borrowing in a climate of historically-low interest rates.S. The study found conclusive empirical evidence that total debt exceeding 90 percent of the economy has a significant negative effect on economic growth. credit cards and car files/faculty/51_Growth_in_Time_Debt. the only solutions to a debt crisis would be truly painful: massive tax increases. It might even shock those who lived through the double-digit interest rates of the early 1980s. The Consequences of Inaction Stagflation The economic effects of a debt crisis on the United States would be far worse than what the nation experienced during the financial crisis of 2008.economics. however. and Kenneth S. Carmen M. foreigners flocked to Treasury debt simply because other investments looked so unsafe by comparison. sudden and disruptive cuts to vital programs. Real pain for families Warning signs in financial markets would merely be a harbinger of the real economic pain that would eventually be felt by American families in the event of a debt crisis. For starters.S. Essentially. A recent study completed by Reinhart and economist Ken Rogoff of Harvard confirms this common-sense conclusion. Absent a bailout.

and the global economy. It turns out that roughly half of all that debt is in the form of variable interest rate loans. Monetizing the debt. Businesses would be doubly squeezed because. meanwhile. considered to be safe and highly liquid assets by virtually all financial institutions worldwide. A U. A large chunk of that total debt consists of home mortgages. 2011 21 . and U. Harsh austerity As economic growth deteriorates. home furnishings. If the nation ultimately experiences a panicked run on its debt. government were forced to address such a situation by cutting domestic spending and raising taxes to close the budget gap. In such a crisis. economy. and the inevitable result would be less business expansion and higher unemployment. Real pain for businesses Higher borrowing costs would also serve as a serious impediment for businesses. households are still heavily indebted.Despite the increase in saving rates that has occurred in the wake of the financial crisis. debt crisis would lead to sharp declines in the dollar and in the price of these bonds.S. it will be forced to make immediate and painful fiscal adjustments (like the austerity program that has provoked riots in Greece). This would wipe out the savings of millions of Americans. Treasury bonds are the lynchpin of global debt markets. demand for their products (particularly consumer durables bought on credit like cars. etc. the government would have to slash spending and raise taxes to narrow its large fiscal gap.S. growth in overall consumer spending. this would mean punishing seniors twice. household debt.S. would decline. Add in higher taxes from a cash-strapped government trying to appease its creditors. Financial system breakdown The U. The resulting panic would be orders of magnitude more disruptive than the financial crisis in 2008. House Budget Committee | April 5. If the U. while the rest is in credit cards and other forms of debt. Promises to current retirees would be broken. The rise in interest rates would lead to lower business investment as companies would face a much higher hurdle for profitability on potential expansion plans. Given that a serious debt crisis could lead to a sharp increase in Treasury rates. U.000 per year. would soon lead to a destabilizing inflation. the Fed may also face rising pressure to step in and “monetize” the government’s debt – essentially printing money to buy up the public debt that private investors refuse to finance. and a vicious cycle ensues. the added interest costs for the typical family could easily exceed $1. estimates suggest that an interest rate increase of just 1 percentage point would lead to over $400 in extra interest payments each year for the average family. The consequences of these actions would be disastrous for the U. it would be compelled to do so indiscriminately. When combined with benefit cuts.) would be slipping as consumer spending tailed off. it becomes harder for the government to raise revenue through taxes. causing a deterioration of the balance sheets of large financial institutions. Facing the inability to borrow at a reasonable rate in the market.S. The nation’s households still owe $13 trillion in private debt. which accounts for nearly 70 percent of the U.S.S. According to the current level and composition of U. dollar is the world’s reserve currency. and tax rates would be raised across-the-board.S. or roughly 120 percent of their total disposable income. as their funding costs were rising. without regard for the economic consequences. hitting seniors the hardest. meaning that a sudden increase in Treasury bond rates would lead to higher borrowing costs for consumers relatively quickly.S. As household borrowing costs spiked.

financial historian Niall Ferguson surveyed some of the great empire declines throughout history and observed that “most imperial falls are associated with fiscal crises. The new House majority was sent here by the American people to get spending under control. or it can begin – today – the work of restoring the vitality and greatness of America. and confront these great challenges today to allow this generation to pass an even greater nation along to the next generation. interest payments on the national debt will begin to exceed yearly defense spending just 11 years from now. Last year in Foreign Affairs magazine. “Complexity and Collapse: Empires on the Edge of Chaos. Niall. debt is not just about dollars and cents.” Foreign Affairs. If it stays on its current fiscal path. the United States will be unable to afford its role as an economic and military superpower. For this and many other reasons. as well as difficulties with financing public debt.The Path to Decline In the end. Congress must act now to change the nation’s fiscal course. but also about America’s status as a world power and its freedom to act in its own best interests.” 8 America must not lose its role in the world. All the… cases were marked by sharp imbalances between revenues and expenditures. Alarm bells should be ringing loudly… [for] the United States. 2011 22 . keep taxes low. 8Ferguson. In just 16 years. House Budget Committee | April 5. March/ April 2010. If the nation stays on its current path.S. Congress can choose to let this nation go the way of fallen empires. yearly interest expenses will be double national defense spending. Other nations with very different interests will rush in to fill that role. the debate about rising U.

It targets hundreds of government programs that have outlived their usefulness. Instead. and the current administration has offered no serious plan to address the sea of red ink. Reform government to make it more efficient. This budget locks in savings with enforceable spending caps and budget process reforms. GOVERNMENT When it comes to this generation’s defining challenge – the explosive growth of the national debt – the simple truth is that Washington has not been honest with the American people. This budget ends the taxpayer bailouts of failed financial institutions and stops Washington from picking the winners and losers across sectors of the economy. This budget offers America a model of government guided by the timeless principles of the American Idea: free market democracy. It reflects an extension of the moratorium on earmarks. create jobs. Changing Washington’s culture of spending: The budget process in Washington contains numerous structural flaws that bias the federal government toward ever-higher levels of spending. liberty and the pursuit of happiness. House Budget Committee | April 5. This budget removes moratoriums on safe. and equal opportunity for all under a limited constitutional government of popular consent. a secure safety net. American men and women in uniform are presently engaged with a fierce enemy and dealing with emerging threats around the world. Boosting American energy resources: Too great a percentage of America’s vast natural resources remain locked behind bureaucratic barriers and red tape. And it repeals the government takeover of health care enacted last year and moves toward patient-centered reform. 1. while fostering an environment for economic growth and private sector job creation.S. When government takes on too many tasks. but also how tax dollars are spent. This budget offers a set of fundamental reforms to put the nation back on the right track. Ending corporate welfare: There is a growing and pernicious trend of government overreach into sectors of the private economy – a trend that stacks the deck in favor of entrenched interests and stifles growth. and reduce dependence on foreign oil. In certain key respects. This budget recommits the federal government to the security of every American citizen’s natural right to life. Streamlining other government agencies: Government spending on domestic departments and agencies has grown too much. This budget achieves savings in the category of national defense without jeopardizing preparedness or critical missions. This budget starts to restore spending discipline to a government that badly needs it by returning non-security discretionary spending to well below 2008 levels. and unlocks American energy production to help lower costs. it usually doesn’t do any of them very well. The last Congress added trillions to the problem. this budget rejects proposals to make deep. Providing for the common defense: Recognizing that the first job of government is to secure the safety and liberty of its citizens from threats at home and abroad. There is a vacuum of leadership in Washington. effective and responsible The role of the federal government is both vital and limited. responsible energy exploration in the United States. open competition. too fast over the past decade. This budget attempts to lead where others have fallen short. Limited government also means effective government. ends Washington policies that drive up gas prices. A REFORM AGENDA FOR THE U. $100 billion of which would be reinvested in higher combat priorities. with much of the money going to programs and projects the nation can do without. a robust private sector bound by rules of honesty and fairness. 2011 23 . It reduces the bureaucracy’s reach by applying private-sector realities to the federal government’s civilian workforce. the federal government has strayed from these timeless principles. addressing not only what Washington spends. across-the-board cuts in funding for national defense. To do otherwise would consign the United States to a diminished future – a future that disrespects the sacrifices that generations of American families have made to secure the promise of this exceptional nation. it reflects the $178 billion in savings identified by Defense Secretary Robert Gates.

Saving Medicare: A flaw in Medicare’s structure is driving up health care costs. In addition. 3. It strengthens Medicaid. food stamps and job training programs by providing states with greater flexibility to help recipients build self-sufficient futures for themselves and their families. This budget consolidates a complex maze of dozens of job-training programs into more accessible. 2011 24 . The framework established in this budget secures health and retirement benefit programs both for current beneficiaries. which are. threatening to bankrupt the system – and ultimately the nation. This budget improves incentives for job creators to work. This budget embraces the widely acknowledged principles of pro-growth tax reform by proposing to consolidate tax brackets and lowers tax rates. is nearer at hand than most acknowledge. Individual tax reform: The current code for individuals is too complicated. in turn. offering instead real security through real reforms. This budget heads off a crisis by forcing action from the President and both chambers of Congress to ensure the solvency of this critical program – creating the space for bipartisan solutions. accountable career scholarships aimed at empowering American workers with the resources they need to pursue their dreams. The government must do a much better job of leveraging and targeting existing resources in this policy area. Medicare will provide increased assistance for lower-income beneficiaries and those with greater health risks. Reform that empowers individuals — with a strengthened safety net for the poor and the sick — will guarantee that Medicare can fulfill the promise of health security for America’s seniors. This budget ends an onerous. Corporate tax reform: American businesses labor under the highest corporate income tax in the developed world. These changes will not affect those in and near retirement in any way. yet the tax itself raises relatively little revenue. who will receive the benefits they’ve organized their retirements around. Reform welfare to strengthen the social safety net This budget builds upon the historic progress of bipartisan welfare reform in the late 1990s. The perverse incentives created by the corporate income tax do a lot of damage.2. clearing out the burdensome tangle of loopholes that distort economic activity. with a top rate of 25 percent. This budget extends those successes to other areas of the safety net to ensure that America’s safety net does not become a hammock that lulls able-bodied citizens into lives of complacency and dependency. who will inherit stronger programs they can count on when they retire. This budget saves Medicare by fixing this flawed structure so that the program will be there for future generations. Advancing Social Security solutions: The risk to Social Security. Reform the tax code to promote economic growth and job creation This budget recognizes that the nation’s fiscal health requires a vibrant. enjoying the same kind of choices in their plans that members of Congress enjoy today. It charts a prosperous path forward by reforming a tax code that is overly complex and unfair. growing private sector. invest. Repairing a broken Medicaid system: Medicaid’s flawed financing structure has created rapidly rising costs that are nearly impossible to check. Targeting assistance to those in need: The welfare reformers of the 1990s were not able to extend their work beyond cash welfare to other means-tested programs. Medicare would then provide a payment to subsidize the cost of the plan. House Budget Committee | April 5. 4. Preparing the workforce for a 21st century economy: The government’s dozens of job-training programs suffer from overlapping responsibilities and too often lack accountability. with high marginal rates that discourage growth. When younger workers become eligible for Medicare. one-size-fits-all approach by converting the federal share of Medicaid spending into a block grant that gives states the flexibility to tailor their Medicaid programs to the needs of their unique populations. driven by demographic changes. and for future generations. they will be able to choose from a list of guaranteed coverage options. Reform government programs to fulfill the mission of health and retirement security This budget puts an end to empty promises from a broke government. and innovate in the United States by lowering the corporate rate from 35 percent to a much more competitive 25 percent.

economic depression. This generation must not be the first generation to fail – to break the link between our past. In his State of the Union Address on January 4. House Budget Committee | April 5. and each generation has found strength in America’s highest principles and called forth its deepest virtues to make certain that the next generation inherited a stronger. or military threats from abroad. The Path to Prosperity is the groundwork for a serious conversation about the future of this exceptional nation. our nation has been marked by hardship. The elected representatives of the American people – in the House of Representatives. yet defined by great courage and achievement in monumental efforts. transform its government. our present and our future.The Choice Throughout history. rediscovers her abiding principles. the nation’s crushing burden of debt jeopardizes this legacy. The Path to Prosperity charts a different course. From the beginning. 1935. Each generation has been tested. Today. This budget provides a plan for assuring that this generation upholds America’s historic legacy. and weaken its national identity in ways that may not be reversible.To dole out relief in this way is to administer a narcotic. In this we face two dangers: long-term economic decline as the number of makers diminishes and the number of takers grows and. savers. It marks a new federal commitment. and lenders that the new House majority recognizes the threat that unlimited government poses to the American way of life. and that it is determined to fulfill its commitments and responsibly restrain government’s growth. confirmed by the evidence immediately before me. worse. This generation’s defining moment has arrived. a subtle destroyer of the human spirit… It is in violation of the traditions of America. and charts a new path to prosperity. While an important statement of priorities. 2011 25 . investors. a budget is merely a blueprint for the actual work of statecraft. Americans have selflessly tackled the difficult challenges before the republic. gradual moral-political decline as dependency and passivity weaken the nation’s character and as the power to make decisions is stripped from individuals and their elected representatives and given to non-elected bureaucracies. whether civil war. Restoring limits to the size and scope of government is not a partisan issue. in the Senate and in the White House – now must take up the tools and start building the future Americans deserve. assuring this nation’s workers. President Franklin Roosevelt – in words later repeated by President Ronald Reagan – warned of the threat to America’s national character from permanent dependency on government: The lessons of history. more prosperous and free America. show conclusively that continued dependence upon relief induces a spiritual and moral disintegration fundamentally destructive to the national fiber. Americans truly face a monumental choice – a choice that can no longer be avoided. America is drawing perilously close to a tipping point that has the potential to curtail free enterprise.

7 DEFICIT 9.7 67.6 2.7 20.1 17.0 19.858 3.870 DEFICIT -­‐1. PUBLIC AS  A  SHARE  OF  GDP 10-­‐YEAR 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 AVERAGE OUTLAYS 24.217 12.9 17.2 72.7 69.388 -­‐995 -­‐699 -­‐492 -­‐434 -­‐481 -­‐408 -­‐379 -­‐414 -­‐402 -­‐385 -­‐5.671 3.7 70.8 17.071 n.6 17.8 1.7 DEBT  HELD  BY  THE   68.1 22.6 PUBLIC .958 REVENUES 2.377 3.529 3.939 4.9 17.5 21.618 3.a.354 34.886 14.9 19.8 20.559 3.352 4.2 18.998 4.2 20.0 18.094 3.418 12.5 71.254 15.3 17.8 16.230 2.2 73.681 16.237 3.801 13.2 20.739 39.4 17.2 6.3 2.3 4.8 1.0 1.9 19.860 3. S-­‐1 FY2012  CHAIRMAN'S  MARK (NOMINAL  DOLLARS  IN  BILLIONS) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012-­‐2021 OUTLAYS 3.8 68.363 14.123 4.8 74.9 20.544 4.9 18.326 13.5 71.586 3.533 2.4 2.589 3.5 REVENUES 14.800 15.5 74.142 4.8 72.745 3.9 2.351 11.9 1.7 19.088 DEBT  HELD  BY  THE   10.5 2.

649 DEBT  HELD  BY  THE   -­‐11 -­‐98 -­‐94 -­‐118 -­‐229 -­‐396 -­‐601 -­‐840 -­‐1.162 DEFICIT -­‐11 -­‐86 7 -­‐21 -­‐104 -­‐154 -­‐182 -­‐206 -­‐251 -­‐308 -­‐344 -­‐1.016 -­‐6.214 REVENUES 0 -­‐11 -­‐39 -­‐118 -­‐206 -­‐258 -­‐228 -­‐249 -­‐240 -­‐240 -­‐243 -­‐1.a.033 -­‐1.  PRESIDENT'S  BUDGET (NOMINAL  DOLLARS  IN  BILLIONS) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012-­‐2021 OUTLAYS -­‐37 -­‐179 -­‐241 -­‐390 -­‐520 -­‐618 -­‐690 -­‐773 -­‐848 -­‐939 -­‐1.735 n. PUBLIC FY2012  CHAIRMAN'S  MARK  VS.  CBO  BASELINE (NOMINAL  DOLLARS  IN  BILLIONS) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012-­‐2021 OUTLAYS -­‐11 -­‐110 -­‐220 -­‐368 -­‐510 -­‐602 -­‐664 -­‐733 -­‐796 -­‐869 -­‐941 -­‐5. S-­‐2 FY2012  CHAIRMAN'S  MARK  VS.877 -­‐4.139 -­‐1.831 DEFICIT -­‐38 -­‐169 -­‐202 -­‐272 -­‐314 -­‐360 -­‐461 -­‐524 -­‐608 -­‐699 -­‐773 -­‐4.938 n.890 -­‐2.a.110 -­‐3.511 -­‐1. PUBLIC .406 -­‐1.382 DEBT  HELD  BY  THE   -­‐38 -­‐243 -­‐443 -­‐715 -­‐1.812 REVENUES 0 -­‐25 -­‐227 -­‐346 -­‐406 -­‐448 -­‐482 -­‐527 -­‐544 -­‐561 -­‐597 -­‐4.450 -­‐3.

058 1.586 3.618 3.159 MEDICAID 275 259 262 248 243 252 263 265 280 291 305 2.667 MEDICARE 563 560 601 636 666 720 748 776 839 893 953 7.060 TOTAL  OUTLAYS 3.559 3.958 .863 OTHER  MANDATORY 489 410 373 309 270 279 264 242 267 268 269 2.739 39.392 PRESIDENT'S  HEALTH   0 0 0 0 0 0 0 0 0 0 0 0 CARE  LAW SOCIAL  SECURITY 727 760 799 841 888 939 995 1.529 3. S-­‐3 FY2012  CHAIRMAN'S  MARK  BY  MAJOR  CATEGORY (NOMINAL  DOLLARS  IN  BILLIONS) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2021-­‐2022 SECURITY   711 683 679 686 697 714 725 736 757 772 788 7.123 4.671 3.352 4.998 4.952 NET  INTEREST 212 256 318 387 448 507 558 600 634 666 687 5.266 9.194 1.124 1.544 4.858 3.236 GLOBAL  WAR  ON   76 118 93 65 54 51 50 50 50 50 50 630 TERROR NON-­‐SECURITY 565 482 435 416 404 396 395 396 402 410 422 4.

214 .  CBO  BASELINE  BY  MAJOR  CATEGORY (NOMINAL  DOLLARS  IN  BILLIONS) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2021-­‐2022 SECURITY 4 28 25 27 27 26 24 21 17 12 8 214 GLOBAL  WAR  ON  TERROR 2 -­‐10 -­‐58 -­‐95 -­‐111 -­‐119 -­‐122 -­‐126 -­‐130 -­‐134 -­‐138 -­‐1.617 MEDICAID 0 -­‐1 -­‐13 -­‐45 -­‐63 -­‐73 -­‐82 -­‐102 -­‐112 -­‐131 -­‐150 -­‐771 MEDICARE 0 0 1 3 4 3 0 -­‐3 -­‐9 -­‐14 -­‐17 -­‐30 PRESIDENT'S  HEALTH  CARE  LAW 0 -­‐6 -­‐9 -­‐66 -­‐122 -­‐164 -­‐182 -­‐194 -­‐208 -­‐219 -­‐233 -­‐1.044 NON-­‐SECURITY -­‐15 -­‐79 -­‐117 -­‐136 -­‐152 -­‐166 -­‐177 -­‐188 -­‐196 -­‐202 -­‐204 -­‐1.016 -­‐6.  PRESIDENT'S  FY2012  BUDGET  BY  MAJOR  CATEGORY (NOMINAL  DOLLARS  IN  BILLIONS) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2021-­‐2022 SECURITY 0 0 0 0 0 0 0 0 0 0 0 0 GLOBAL  WAR  ON  TERROR 0 0 0 0 0 0 0 0 0 0 0 0 NON-­‐SECURITY -­‐14 -­‐72 -­‐79 -­‐78 -­‐83 -­‐90 -­‐95 -­‐102 -­‐105 -­‐113 -­‐106 -­‐923 MEDICAID 0 -­‐1 -­‐14 -­‐44 -­‐61 -­‐69 -­‐77 -­‐97 -­‐106 -­‐125 -­‐140 -­‐735 MEDICARE 0 -­‐12 -­‐22 -­‐25 -­‐28 -­‐32 -­‐38 -­‐44 -­‐54 -­‐63 -­‐71 -­‐389 PRESIDENT'S  HEALTH  CARE  LAW 0 -­‐6 -­‐9 -­‐66 -­‐122 -­‐164 -­‐182 -­‐194 -­‐208 -­‐219 -­‐233 -­‐1. S-­‐4 FY2012  CHAIRMAN'S  MARK  VS.812 FY2012  CHAIRMAN'S  MARK  VS.810 NET  INTEREST -­‐2 -­‐4 -­‐10 -­‐22 -­‐41 -­‐64 -­‐93 -­‐125 -­‐161 -­‐200 -­‐244 -­‐965 TOTAL  OUTLAYS -­‐37 -­‐179 -­‐241 -­‐390 -­‐520 -­‐618 -­‐690 -­‐773 -­‐848 -­‐939 -­‐1.403 SOCIAL  SECURITY 0 0 0 0 0 0 0 0 0 0 0 0 OTHER  MANDATORY -­‐2 -­‐42 -­‐46 -­‐48 -­‐78 -­‐82 -­‐82 -­‐83 -­‐82 -­‐85 -­‐87 -­‐715 NET  INTEREST 0 -­‐1 -­‐4 -­‐7 -­‐15 -­‐27 -­‐42 -­‐58 -­‐76 -­‐97 -­‐119 -­‐446 TOTAL  OUTLAYS -­‐11 -­‐110 -­‐220 -­‐368 -­‐510 -­‐602 -­‐664 -­‐733 -­‐796 -­‐869 -­‐941 -­‐5.403 SOCIAL  SECURITY -­‐14 0 0 0 1 1 1 2 2 2 2 11 OTHER  MANDATORY -­‐7 -­‐85 -­‐106 -­‐155 -­‐186 -­‐199 -­‐205 -­‐212 -­‐216 -­‐221 -­‐225 -­‐1.

S-­‐5 CHAIRMAN’S  MARK  VS  STATUS  QUO CBO  LONG-­‐TERM  ANALYSIS PROJECTED 2022 2030 2040 2050 CHAIRMAN'S  MARK TOTAL  REVENUES 18  ½ 19     19     19     TOTAL  SPENDING 20  ¼ 20  ¾ 18  ¾ 14  ¾ DEFICIT  (-­‐)  OR  SURPLUS -­‐2 -­‐1  ¾ ¼ 4  ¼ DEBT  HELD  BY  THE   70 64 48 10 PUBLIC ALTERNATIVE  FISCAL  SCENARIO TOTAL  REVENUES 19  ¼ 19  ¼ 19  ¼ 19  ¼ TOTAL  SPENDING 26  ¾ 32  ¼ 38  ½ 45  ¼ DEFICIT  (-­‐)  OR  SURPLUS -­‐7  ½ -­‐13     -­‐19  ¼ -­‐26     DEBT  HELD  BY  THE   95 146 233 344 PUBLIC .

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